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Superannuation funds and borrowing

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With an amendment to the Superannuation Industry (Supervision) Act 1993 (Cwlth), superannuation funds are now able to borrow money. The rules regarding the circumstances of borrowing are specific and are an instalment warrant.

This means the fund has the right (but not an obligation) to acquire the legal ownership of the asset through the payment of instalments. The borrowing must be of limited recourse – the loan can only be secured against the asset being purchased.

Given this amendment SMSFs are able to borrow money to buy a property if the purchase is structured correctly. There are no restrictions on who the lender may be which means that you may loan the superannuation fund the money directly.

Gearing in superannuation funds is a complex area and you should call your Chartered Accountant to discuss your options.

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